1.Fed officials warned rate hikes may be needed if inflation stays high

Fed authorities cautioned rate hikes may be needed if inflation stays high.

Key points

• As previously noted by the New York Times, what to watch: The minutes additionally confirm that Warsh floated cutting the Fed's eight annual policy meetings to six.
• Although three office-holders dissented in favor of a quarter-point hike, catch up quick: The Fed held interest rates steady at its late July session.
• Those authorities stated they remained concerned concerning too-high inflation that has been above the Fed's 2% target for years.
• What they're saying: " Many participants assessed that policy tightening would likely be necessary if inflation did not decline, " according to the minutes.
• Though some authorities stated they would need to see more evidence that cost pressures were receding, driving the news: Recent inflation data has been encouraging.

Fed authorities cautioned rate hikes may be needed if inflation stays high. Add Axios as your preferred source to. See more of our stories on Google.

"A few of the participants who favored raising the target range for the federal funds rate at this meeting judged that doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage, " the minutes show.

Consumer rates rose just 0.1% in July, the second consecutive month of benign inflation news, assisted by a temporary drop in energy rates during a lull in the Iran war.

But fighting has since intensified again, pushing gas rates higher and raising the risk that inflation will pick up in August.

Zoom out: Some authorities at the latest Fed gathering worried that inflation was becoming harder to dismiss as a temporary result of tariffs and the war, noting that underlying cost pressures remained elevated even after stripping out those effects, according to the minutes.

Meanwhile, the minutes show that "plenty of" office-holders worried that another bout of high inflation might become self-reinforcing, with workers demanding higher wages and businesses raising rates as they come to expect inflation to stay high.

Notably, the intrigue: The AI boom is emerging as another source of inflation pressure, with the massive buildout boosting demand for everything from electricity to skilled workers.

Fed authorities observed solid demand for electricians, machinists and engineers was "leading to notable increases in their wages, " according to the minutes.

That "would allow more information to accumulate between meetings" and offer Fed office-holders "more time to consider strategic monetary policy issues, " the minutes noted. No decision on the number of meetings has been created.

In short, 1.Fed officials warned rate hikes may be needed if inflation stays high is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.